Report from the Commission 2003 - Report on PHARE and the pre-accession instruments for Cyprus, Malta and Turkey {SEC(2005) 273}
Date: 2005-03-01
Institutions: European Commission
Subjects: Cyprus, Malta, Türkiye, accession to the European Union, activity report, aid evaluation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 1.3.2005 
COM(2005) 64 final 

REPORT FROM THE COMMISSION 

2003 REPORT ON PHARE AND THE PRE-ACCESSION INSTRUMENTS FOR 
CYPRUS, MALTA AND TURKEY 

{SEC(2005) 273} 

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INTRODUCTION 

This  is  the  annual  report  by  the  European  Commission  to  the  European  Parliament,  the 
Council of the European Union and the European Economic and Social Committee, assessing 
the progress of Phare in the ten beneficiary countries, and on the pre-accession instruments for 
Cyprus, Malta and Turkey.  

A technical document which is presented as an annex to this Report contains sections on the 
programming  and  implementation  of  the  Phare  Programme  in  each  of  the  13  beneficiary 
countries. 

1. 

THE YEAR IN REVIEW 

1.1.  Main evolutions of the Enlargement process in 2003 

Following the decision of the 2002 Copenhagen Council to admit the 10 new Member States 
(Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia 
and Slovenia) to accede on 1 May 2004, the Accession Treaty and the Act of Accession were 
signed  in  Athens  on  16  April  2003  and  was  submitted  for  ratification  by  the  current  and 
acceding Member States, in accordance with each State's national ratification procedures.  

As from the  signature  of  the Accession  Treaty, the acceding countries participate as "active 
observers"  in  Council  bodies,  as  well  as  in  committees  presided  over  by  the  European 
Commission.  

In order to provide balanced information about the enlargement process, the Commission has 
adopted  an  Enlargement  Communication  Strategy,  addressing  EU  citizens,  as  well  as  the 
population of the new member states.  

Concerning the remaining candidate countries, in its Regular Reports adopted on 5 November 
2003 the Commission indicated that Bulgaria and Romania continued to fulfil the political 
criteria, but that they did not yet fully comply with the economic criteria. Both countries were 
making good progress and on track to complete the required legislative alignment; however, 
sustained  efforts  were  required  in  order  to  develop  sufficient  administrative  and  judicial 
capacity  to  ensure  proper  implementation  of  the  acquis.  To  assist  these  countries  in  their 
efforts, on 14 April the Council adopted revised Accession Partnerships, based on proposals 
put  forward  by  the  Commission.  In  addition,  pre-accession  assistance  was  being  increased 
significantly1. 

As regards Turkey, its government had accelerated reforms and had made significant efforts 
towards achieving compliance with the Copenhagen political criteria, as well as considerable 
progress  towards  meeting  the  economic  criteria.  The  Report  however  also  indicated  that 
further efforts were needed in a number of areas, such as the civilian control of the military 
and the exercise of fundamental freedoms including freedom of religion. A revised Accession 
Partnership  providing  detailed  guidance  about  the  areas  where  further  reforms  are  needed 

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Increase by average of 30% during period 2004-2006, amounting to an average yearly budget of € 400 
million for Bulgaria and of up to €1 billion for Romania. 

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was adopted in April 2003. It included a proposal to increase the financial support in order to 
reach a total budget of € 1050 million over three years. 

Within  this  context  it  must  also  be  mentioned  that  Croatia  applied  for  membership  in 
February 2003 and received candidate status on 18 June 2004. 

1.2.  Main conclusions of the 2003 European Councils 

Concerning  Bulgaria  and  Romania,  the  Brussels  European  Council  of  12  December 
welcomed  the  findings  and  recommendations  of  the  Commission’s  monitoring  reports, 
strategy  paper  and  regular  reports  adopted  by  the  Commission  in  November.  The  Council 
invited the Commission in early 2004 to present its proposal on the financial framework for 
Bulgaria and Romania on the basis of which revised draft common positions on the Chapters 
remaining open would be submitted in spring 2004. The Council took note of the Commission 
statement that it intended to base its proposal on the principles and methods which applied in 
the negotiations with the ten acceding countries. Whilst Phare prepares candidate countries to 
join  the  EU,  it  also  aims  to  bridge  the  pre-accession  support  with  structural  funds.  Further 
information can be found in the Annex Part II.1. 

As  regards  Cyprus,  the  June  Thessaloniki  European  Council  welcomed  the  Commission’s 
Communication on “Ways of promoting economic development in the northern part of Cyprus 
and bringing it closer to the Union”. The Commission proposed to become active in giving 
financial assistance to the Turkish-Cypriot northern parts for economic development, so as to 
promote trade with the northern part and bring it closer to the Union. 

2. 

IMPLEMENTATION OF THE PROGRAMMES: GENERAL OVERVIEW 

2.1. 

Implementing the Phare Guidelines 

2003 was the last year of pre-accession programming for the 10 New Member States. From 
2004 pre-accession programming covers only Bulgaria and Romania. 

Programming  was  based  on  the  Phare  Guidelines2,  which  were  subsequently  revised  on  6 
September 20023 with the adoption by the Commission of an ad-hoc phasing-out strategy for 
Phare,  to  address  the  unprecedented  transition  from  pre-accession  aid  to  structural  support, 
and  to  accompany  changes  to  the  Cross  Border  Co-operation  (CBC)  regulation  (EC)  No. 
2760/98, to accommodate the unique approach required in the field of nuclear safety and to 
emphasise the transition to EDIS (see also section 3.1). 

On 22 December, the Guidelines were further revised, with a communication4 redefining the 
concept of ‘Institution Building’5 and emphasising the need to accelerate the decentralisation 
of financial and management responsibilities to the recipient Countries.  

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(SEC (1999) 1596), approved by the Commission on 13 October 1999 
C(2002) 3303-2 
C (2003) 4906 
Indicatively, 65% of Phare today goes to Institution Building (includes 30% ‘soft’ measures, e.g. know how and 
35%  ‘hard’  measures,  e.g.  investment  in  equipment).  This  is  in  contrast  to  the  former  division  which  was  30% 
Institution  Building  (‘soft’  measures  only)  and  70%  Investment  (consisting  of  35%  investment  in  Social  and 
Economic cohesion and 35% investment in Institution Building). 

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The  Phare  phasing-out  strategy  continued  to  be  implemented  in  order  to  ensure  a  smooth 
transition to countries acceding on 1st May 2004. 

Besides  the  amendment  to  the  Phare  CBC  Regulation,  the  revised  Phare  Guidelines  convey 
two  important  messages  related  to  trans-national  and  inter-regional  co-operation  and  to  co-
operation with non-EU and non-candidate countries: the 10 Phare Countries were encouraged 
to  use  their  Phare  National  Programme  funds  to  support  actions  of  a  cross-border  nature  at 
their  external  borders,  so  as  to  address  potential  dividing  lines  on  the  future  border  of  the 
Union. Moreover, Bulgaria and Romania have been invited to continue to use their National 
Programme funds to fund their participation in Interreg III B (trans-national) or Interreg III C 
(inter-regional) programmes.  

Although  pre-accession  assistance  to  Malta,  Cyprus  and  Turkey  are  governed  by  separate 
regulations6, their 2003 programmes broadly follow Phare methodology and comitology.  

2.2. 

Total Phare Commitments7 

Total commitments amounted to € 1,699 million, comprising: 

National Programmes 

€ 1,223 million

cross border co-operation 

€ 161 million

regional and horizontal programmes 

€ 187 million

nuclear safety 

€ 128 million

National programmes were divided as follows: 

Bulgaria 

€ 99 million  

Lithuania 

€ 67 million

Czech Rep 

€ 95 million  

Poland 

Estonia 

Hungary 

Latvia 

€ 40 million  

Romania 

€ 107 million  

Slovakia 

€ 46 million  

Slovenia 

€ 403 million

€ 272 million

€ 57 million

€ 38 million

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Regulation (EC) No 555/2000, adopted on 13 March 2000 for Cyprus and Malta, (EC No 2500/2001), 
adopted on 30 December 2001 for Turkey 
Additional financial information on PHARE is provided in the Annex Part III 

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In  addition,  pre-accession  assistance  programmes  were  agreed  for  Malta,  Cyprus  and 
Turkey and a special aid package for the northern part of Cyprus: 

Cyprus 

Malta 

€ 12 million 

Cyprus (northern part) 

€ 12 million

€ 13 million 

Turkey 

€ 145 million

Detailed information about Phare in each country can be found in the Annex -Part I: Country 
section- to this report. 

2.3. 

Financial and technical assistance 

The current Phare Guidelines state that approximately 65 % of Phare resources is earmarked 
for  Institution  Building.  The  main  instrument  for  institution  building  and  transfer  of  know-
how  are  Twinning  or  Twinning  Light  (secondment  of  experts  from  Member  States  to  the 
candidate countries to help develop the capacity to implement specific aspects of the acquis). 
The remaining indicative 35 % of Phare resources is earmarked for investments designed to 
promote Economic and Social Cohesion (ESC).  

Following the focus of 2002 to establish Action Plans to address the priority actions related to 
administrative  and  judicial  capacity  needed  before  accession,  and  on  implementing  specific 
measures aimed at resolving them, the 2003 focus was put on efforts to support ESC, and to 
prepare for post-accession EU Funds.  

To deal with emerging high priority accession issues that could be better tackled through the 
economies of scale of such programmes, a number of multi-country or horizontal programmes 
were  put  in  place.  These  programmes  covered  SME  development,  municipal  infrastructure, 
municipal  finance,  TAIEX  operations,  participation  in  Community  Committees,  nuclear 
safety,  small  projects  programme,  statistical  co-operation,  environmental  protection  and  an 
Information  and  communication  programme.  For  more  detailed  information  on  these 
activities, see Annex Parts II.2.2.2 and II.2.2.3. 

2.4. 

Co-ordination of the Community Pre-accession assistance 

SAPARD8  (Special  Accession  Programme  for  Agriculture  and  Rural  Development)  aims  to 
help  candidate  countries  deal  with  the  problems  of  the  structural  adjustment  in  their 
agricultural  sectors  and  rural  areas,  as  well  as  in  implementing  the  acquis  communautaire 
concerning the Common Agricultural Policy and related legislation. Detailed information on 
SAPARD activities can be found in the SAPARD annual report for 2003. 

ISPA9  (Instrument  for  Structural  Policies  for  Pre-Accession)  is  directed  mainly  towards 
aligning the applicant countries on Community infrastructure standards. It also finances major 
environmental  and  transport  infrastructure.  Detailed  information  on  ISPA  activities  can  be 
found in the ISPA annual report for 2003. 

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For general information, see also the website of DG Agriculture 
http://europa.eu.int/comm/agriculture/external/enlarge/index_en.htm 
For general information, see also the website of DG Regional policy 
http://europa.eu.int/comm/regional_policy/funds/ispa/ispa_en.htm 

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A separate annual report on co-ordination of pre-accession assistance provides more detailed 
information  on  co-ordination  between  Phare,  ISPA  and  SAPARD.  The  Commission’s  Co-
ordination  Committee  for  the  3  pre-accession  instruments,  set  at  Directors  level,  convened 
three times. 

A General Assistance Document, wherein the Commission informs about the co-ordination of 
pre-accession aid, in particular about the indicative financial indications for each country in 
relation  to  the  three  instruments,  about  co-ordination  with  EIB  and  IFIs  and  about  progress 
and  perspectives  for  decentralised  management,  was  presented  at  the  Phare  Management 
Committee on 9 April.  

2.5. 

Co-operation with the EIB and International Financial Institutions 

Co-operation with the EIB and other IFIs continued under the framework of the Memorandum 
of Understanding on co-operation in the pre-accession assistance.  

The Commission Services periodically organise meetings with the EIB and other IFIs to co-
ordinate issues related to programming and implementation, as well as procedural issues. To 
organise the transition from pre-accession support to full membership of the EU for countries 
acceding in May 2004, the Commission also chaired on 26 March 2004 the EC/IFI Working 
Group  and  the  EC/IFI  High-Level  Group,  which  consist  of  meeting  at  senior  management 
level between EC and all IFIs. 

For PHARE, the main co-financing instrument was again the SME Facility in which the EIB, 
the  EBRD  and  the  Council  of  Europe  Development  Bank/KfW  are  participating.  The 
objective  is  to  continue  co-financing  capacity  building  of  the  financial  sector  to  develop 
financing  for  SMEs  (through  the  SME  Facility)  and  municipalities  (through  the  Municipal 
Lending  Facility).  On  5  December,  the  Commission  approved  two  PHARE  programmes  on 
SME Finance Facility 2003 which included for the first time a Rural Sub-Window allowing 
for  a  specific  targeting  of  the  development  of  the  rural  credit  sector  among  local  financial 
intermediaries. The two IFIs involved are the EBRD and the CEB/KfW. For more details on 
these facilities, see details in Annex Part II.2.2.3. 

3. 

PROGRAMME MANAGEMENT  

3.1.  Moving towards Extended Decentralisation Implementation System (EDIS) 

EDIS  stands  for  full  decentralisation  of  EU  support,  meaning  the  process  by  which 
management  of  EU  pre-accession  funds  is  devolved  to  candidate  country  administrations, 
where  the  Commission  exercises  no  systematic  ex-ante  control  over  individual  transactions, 
but is limited to an ex-post control, whilst it retains the final responsibility for general budget 
execution. 

Preparations for EDIS were accelerated in all candidate countries during 200310. The move to 
EDIS  is  done  through  an  approach  consisting  of  4  stages,  which  are  described  in  the 
Commission  Working  document  “Preparing  for  Extended  Decentralisation”  (sent  to  the 
candidate countries in 2000) and the document “Roadmap to EDIS for Ispa and Phare” (sent 
to candidate countries in 2001). 

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Except for Turkey which moved to a decentralised implementation system in 2003. 

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The  Commission  and  the  national  administrations  in  candidate  and  accession  countries 
continued to monitor the process through the High Level Working Groups (HLWG), set up in 
2002 in all Phare countries to oversee the transition to EDIS and to provide concrete guidance 
on specific issues related to the move to EDIS. 

In March, a seminar on public procurement was organised in Brussels for the relevant staff in 
the  national  administrations  of  candidate  and  acceding  states.  It  covered  issues  related  to 
changes  following  the  introduction  of  a  new  financial  regulation  applicable  to  the  general 
budget of the European Communities11 and implications on the pre-accession projects, as well 
as  the  switch  from  external  aid  procurement  rules  to  EU  public  procurement  directives  as 
from 1 May 2004.  

The  Commission  followed  up  this  initiative  with  in-country  training  for  staff  in  Phare 
contracting authorities and through the elaboration and dissemination of a comparative study 
(through the assistance of SIGMA) of the external aid rules and the EU directives. 

The  obligation  to  put  EDIS  in  place  by  the  date  of  accession  was  included  in  the  Act  of 
Accession (article 33) and provided a clear impetus for final preparations to move to EDIS. 

For the 12 countries concerned, the EDIS state of play at the end of 2003 was the following: 

•  Bulgaria and Romania had progressed further in Stage 1 (Gap assessment)  

•  Poland and Estonia had completed stage 3 (Compliance assessment), but had not 
yet  submitted  the  EDIS  applications  to  the  Commission  required  to  initiate  the 
final Stage 4 of the Roadmap. Both applications were submitted in early 2004. 

•  The Czech Republic, Hungary, Lithuania, Latvia, Slovakia and Slovenia had 
submitted  the  required  EDIS  applications  to  the  Commission.  This  initiated  the 
final  Stage  and  triggered  a  verification  audit  by  relevant  Commission  audit 
services.  In  the  case  of  a  positive  assessment,  it  would  lead  to  the  granting  of 
EDIS in form of a Commission Decision, waiving ex-ante control on management 
of  pre-accession  funds.  In  November  and  December,  DG  Enlargement  auditors 
undertook on-the-spot verification audits in Hungary and in Slovenia. However, 
the  outcome  of  these  audits  did  not  lead to  the  launch  of  the  process  to  adopt  a 
Commission decision to grant EDIS before the date of accession.  

•  Follow  up  controls  from  2002  audits  were  made  in  Malta  and  Cyprus.  The 
outcome  of  these  follow-up  audits  did  not  lead  to  the  launch  of  the  process  to 
adopt a Commission decision to grant EDIS before the date of accession.  

3.2.  Monitoring and Evaluation 

The  monitoring  and  evaluation  function  aims  firstly  to  monitor  and  evaluate  the  financial 
support  to  the  beneficiary  countries  in  achieving  pre-accession  objectives  by  assessing  the 
programme performance and deriving lessons learned. The second objective is to support the 
development of local monitoring and evaluation capacity as a means to strengthen the states’ 
capacity to manage and control pre-accession aid. 

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Council regulation (EC) No 1605/2002 of June 2002 – OJ L248 of 16.9.2002 

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3.2.1.  Ex ante evaluation 

The  ex  ante  evaluation  report  of  programming  mechanisms  for  Phare  in  2004  and  beyond 
illustrated the needs for a more strategic programming approach, an increase of resources for 
project design and the introduction of a more systematic quality control. This resulted in an 
action plan and follow-up measures12 addressing the report recommendations. 

3.2.2.  Monitoring and Interim Evaluation 

The  Phare  Monitoring  and  Interim  Evaluation  scheme  generated  some  123  individual 
country,  sectoral  and  thematic  evaluation  reports  of  the  Phare  programmes.  Moreover,  the 
interim evaluation (IE) of the pre-accession aid programme for Turkey was contracted in early 
2003, and the IE scheme was also introduced in Malta and Cyprus.  

On the whole, interim evaluation results concluded that Phare performance was satisfactory. 
Projects’ priorities were in line with those of the Accession Partnerships, Regular Reports and 
Action  Plans.  Interim  evaluation  itself  is  now  widely  accepted  as  an  integral  part  of  the 
project  management  cycle.  Following  through  on  evaluation  findings  and  recommendations 
generated  a  cascade  of  beneficial  effects,  and  led  to  the  diffusion  of  an  evaluation  culture. 
Detailed information about IE in the new member states can be found in Annex Part II.3. 

3.2.3.  Ex post evaluation 

The  2003  ex  post  evaluation  of  Phare  1997-98  national  programmes  revealed  the  very  high 
relevance  of  Phare  which  addressed  problems  that  “were  very  critical  or  rather  critical 
obstacles  on  the  path  towards  accession”,  the  highest  impact  in  acquis-oriented  policy 
domains (third Copenhagen criterion), and a strong domination by the Commission Services 
of  the  programming  process,  that  partly  reflects  the  programming  weaknesses  of  the 
Candidates Countries. See also Annex Part II.3. 

3.3. 

Other activities 

A number of other activities were undertaken by the Commission services in order to improve 
the  quality  of  the  programmes  for  the  year  2004,  as  well  as  to  support  the  development  of 
local monitoring and evaluation capacity. Specific actions are described in Annex Part II.3.3. 

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These  included  guidelines  for  multi-annual  programming,  the  improvement  of  the  project  fiches,  and 
the application of Logframes. 

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